How Labour is preparing for a coalition with the Lib Dems

Shadow ministers have been encouraged to look for "points of agreement" with the party and to consider constitutional reforms that would appeal.

To win a majority at the next election, both Labour and the Conservatives will need to defy recent history. No governing party has increased its share of the vote since 1974; no opposition has achieved an overall victory at the first attempt for more than 80 years. Faced with these odds, it is unsurprising that many on both sides consider another hung parliament the likeliest outcome in 2015. 

Earlier this week, the Telegraph reported that David Cameron is preparing for a second coalition with the Lib Dems by discussing new rules to allow Tory MPs to vote on a new power-sharing agreement. Impressed by the discipline of Nick Clegg’s backbenchers compared with that of his truculent troops, Cameron wants his party’s hands "dipped in blood".

But what of Labour? In my politics column in this week's NS, I reveal that the party is making its own preparations for another hung parliament. One shadow minister recently told me that he had been encouraged to look for "points of agreement" with the Lib Dems and to consider constitutional reforms that would appeal to the party, citing the example of proportional representation for local elections. One of the concessions made by Labour when it entered coalition with the Lib Dems in Scotland in 1999 was the introduction of the Single Transferable Vote for local council elections and many Lib Dem activists now believe the party should have pushed for similar reform for England during the coalition negotiations in 2010. 

Labour MPs have also been struck by the increasing degree of policy overlap between the two sides and improved personal relations. In recent months, Labour has called for the introduction of a mansion tax on property values above £2m, a 2030 decarbonisation target for electricity, the removal of Winter Fuel Payments from the wealthiest 5 per cent of pensioners and higher capital investment (in preference to a temporary VAT cut) funded by a rise in borrowing. Earlier this week, it committed to a reduction in the voting age to 16. What all of these policies have in common is that they have all either been proposed or championed by the Lib Dems. This is far from the only motive for their adoption but Miliband and Balls are too astute not to know that this shift will greatly enhance their chances of striking a deal with the third party in 2015. One of the most popular reads among Labour MPs this summer is Andrew Adonis's 5 Days in May in which the Labour peer and former transport secretary laments the party's failure to prepare for the 2010 hung parliament and urges it to not to repeat this error. His advice has not been ignored. 

In response to the voting age pledge, Lib Dem MP Stephen Williams remarked: "If we can bank that as an agreement then if the next parliament does result in an inconclusive election, which I think is quite likely, the more issues that we know in advance that we're likely to agree on will make the negotiations swifter." His parliamentary colleagues are saying much the same thing. If the Tories want the Lib Dems to gift them the majority they will surely fall short of in 2015 (the party needs a seven point lead over Labour on a uniform swing), they should start to think just what baubles they could offer Cable and co. 

Nick Clegg and Ed Miliband attend a ceremony at Buckingham Palace to mark the Duke of Edinburgh's 90th birthday on June 30, 2011 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Owen Smith promises to be a "cold-eyed revolutionary" - but tiptoes round Brexit

The Labour leader challenger takes Jeremy Corbyn on at his own anti-austerity game. 

Owen Smith may be challenging Jeremy Corbyn for the Labour leadership but it seems he has learnt a thing or two from his former boss. 

One year on from abstaining from the Tory Welfare Bill - a decision he now says he regrets - Smith attacked the former Chancellor George Osborne’s austerity policies from Orgreave, a former steel plant which was pivotal during the miners’ strike.  

Listing frustrations from library cuts to delayed trains, Smith declared: “Behind all of these frustrations is one cause – austerity.”

Borrowing the rhetoric that served Corbyn so well, he banged the drum about pay, labour rights and fair taxes. 

Indeed, a spokesman from Jeremy for Labour popped up to say as much: “We welcome Owen’s focus on equality of outcome, reindustrialisation and workers' rights - and his support for policies announced in recent months by Jeremy Corbyn and John McDonnell.”

On policy, though, Smith showed a touch of his own. 

His description of the Department for Work and Pensions as “a byword for cruelty and insecurity” resonates with the deep fear many benefit claimants feel for this faceless but all powerful authority. His promise to scrap it will not go unnoticed.

Another promise, to end the public sector pay freeze, is timely given widespread expectations that withdrawing from the EU’s single market will push up prices. 

He also appealed to the unions with a pledge to scrap the “vicious and vindictive” Trade Union Act. 

The policies may be Corbynite, but where Smith stands out is his determination to be specific and practical. He is selling himself as the Corbyn who actually gets things done. Asked about what he would replace zero-hours contracts with, he responded: "Well it could be one [hour]. But it can't be zero."

As he concluded his speech, he promised “revolution” but continued:

“Not some misty eyed romanticism about a revolution to overthrow capitalism.

“But a cold-eyed, practical, socialist revolution, through a radical Labour Government that puts in place the laws and the levers that can genuinely even things up.”

Smith’s speech, though, steered clear of grappling with the big issues of Brexit. He stands in favour of a second referendum on the Brexit deal, which may appease Labour's inner city voters but could frustrate others who voted Leave.

On the free movement of people – widely viewed as a dividing line between Labour’s Corbynite members and the wider voting population - he has been vague. He has previously expressed support for the "progressive case against freedom of movement" and criticised Corbyn for failing to understand patriotism. But this is not the same as drawing up policy. Whether he can come up with strong views on immigration and still appeal to both voter bases will be his biggest challenge of all. 

Owen Smith's 20 policies

1.      A pledge to focus on equality of outcome, not equality of opportunity 
2.      Scrapping the DWP and replacing it with a Ministry for Labour and a Department for Social Security
3.      Introducing modern wages councils for hotel, shop and care workers to strengthen terms and conditions
4.      Banning zero hour contracts
5.      Ending the public sector pay freeze
6.      Extending the right to information and consultation to cover all workplaces with more than 50 employees
7.      Ensuring workers’ representation on remuneration committees
8.      Repealing the Trade Union Act
9.      Increase spending on the NHS by 4 per cent in real-terms in every year of the next parliament
10.  Commit to bringing NHS funding up to the European average within the first term of a Labour Government
11.  Greater spending on schools and libraries
12.  Re-instate the 50p top rate of income tax
13.  Reverse the reductions in Corporation Tax due to take place over the next four years
14.  Reverse cuts to Inheritance Tax announced in the Summer Budget
15.  Reverse cuts to Capital Gains Tax announced in the Summer Budget
16.  Introduce a new wealth Tax on the top 1 per cent earners
17.  A British New Deal unveiling £200bn of investment over five years
18.  A commitment to invest tens of billions in the North of England, and to bring forward High Speed 3
19.  A pledge to build 300,000 homes in every year of the next parliament – 1.5 million over five years
20.  Ending the scandal of fuel poverty by investing in efficient energy